The lease, which had been challenged by environmental groups the Sierra Club and WildEarth Guardians, includes 786 acres of federally held coal near Somerset.

The sale was initially approved by the BLM last June.

The environmental groups argued that the expansion would have an impact on roadless forest areas in the region, as well as methane venting they said would cause air pollution.

The appeals board – a review board of the Department of Interior – included additional requirements for the use of the lease, such as a “no surface occupancy” requirement in the roadless area that precluded well drilling for methane release.

“They'll have to come up with a way to manage it and this is something Oxbow appears to be considering,” WildEarth director Jeremy Nichols told the Denver Post.

“It is a promising step.”

According to BLM statistics, it could potentially realize royalties of $US6.3 million from the entire tract, which includes 3.96 million tons of recoverable federal coal.

The royalty funds are split equally between the federal government and the state of Colorado.

Earlier this month, the BLM gave its green light to the Elk Creek complex expansion, giving it access to about 555,000 tons of coal.

Oxbow’s application included the addition of approximately 159 acres to lease COC-61357 in Gunnison County and was an extension of the mine’s D-Seam workings.

“The modification … also allows the mine to continue producing coal at the current rate, instead of ceasing production as recoverable leased coal reserves are exhausted,” BLM Uncompahgre field manager Barbara Sharrow said at the time.

BLM’s field office analyzed the proposal through the National Environmental Policy Act but was required to obtain the consent of the federal surface agency as the area involved national forest system lands managed by the Grand Mesa, Uncompahgre and Gunnison national forests.

The secretary of agriculture consented to the project.

Last year BLM asked Oxbow to study the feasibility of mitigating, capturing or using methane vented during mining.

While methane utilization is not mandated under the lease amendment, the agency asked for the evaluation to continue.

The 325-worker Oxbow Elk Creek mine first produced coal in 2002 and had production of 3Mt last year.

According to BLM data, the total direct economic benefits associated with mines within the North Fork Valley, which includes Oxbow as well as the Bowie mine, are more than $US60 million annually.

Gunnison County receives about $1.1 million annually in tax revenues from those operations.